Why College Aid Makes College More Expensive

[dcan]

Great article on SmartMoney.

Federal aid for students has increased 164% over the past decade, adjusted for inflation, according to the College Board. Yet three-quarters of Americans and even a majority of college presidents see college as unaffordable for most, and that sentiment has been steadily spreading, the Pew Research Center reports.

Two new studies offer clues on why. One measures the degree to which some colleges reduce their own aid in response to increased federal aid. The other suggests federal aid is helping to push college costs higher.

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Perhaps worse for students than a crowding out effect is the Bennett Effect, named for William Bennett, who 25 years ago as Secretary of Education wrote for the New York Times, "Increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions."

If subsidies puff up buying power and shift prices higher, as economics courses teach, could federal aid for college help create an affordability problem?

Nice to see Bill Bennett get quoted, especially when he foresaw what is happening now.

Why College Aid Makes College More Expensive - SmartMoney.com

Interestingly, with the market down considerably since 2008, why is it that, except for federal healthcare costs, tuition is the only sector that has risen in price with no apparent attachment to economic market realities?